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RECORD RESERVES

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The number of records upon which the payment of royalties are withheld, off the top, by a record company. This number is best expressed as a percentage of the total number of units produced or shipped by the record manufacturer.

The reserve compensates for the possibility of returned records, e.g., if a record company ships 1000 records to a distributor and maintains a record reserve of 50% for the first 500 records sold, the record company will not pay any royalties to the production company on the reserve quantity until all 1000 records are sold or returned. For any sales in excess of 500, e.g., 520, the record company would pay immediate royalties on only the excess, i.e., 20 records. Also, even though the record company is aware of the number of records permanently distributed (i.e. sold) within 6 to 8 months, they sometimes withhold royalty payment up to 18 months. See Cross-links: RETURN PRIVILEGES, SOLD RECORDS, GUARANTEED SALE BASIS, RECORD RETURNS, CONTRACT-RECORDING CONTRACT clause #34.

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